If you are thinking about buying or selling a horse on a “trial basis”, or if you are entering into a horse sale agreement with a trial period, here are five of the most important things you should consider:

1) The Timing of the Pre-Purchase Exam. The most important consideration in horse sales is usually, “is the horse sound”? If the horse is not sound enough to perform the intended tasks of the prospective buyer, the prospective buyer shouldn’t be taking it “on trial” anyway. It doesn’t happen often, but a horse can sustain an injury or get sick during even a short trial period. Therefore, the pre-purchase exam should be conducted before the horse is ever taken by a prospective buyer to “try out.” If a question is ever raised as to whose possession the horse was in when the horse was injured or got sick, both parties will be informed of the horse’s condition when it left the seller’s property if the pre-purchase exam is conducted before the horse leaves. See the following posts for more information on the types of tests that should be conducted in a pre-purchase exam.

2) Insurance. If the horse is nice / expensive, the seller should insure it for mortality and major medical before the prospective buyer leaves with the horse. Note: Sellers should speak with their insurance agent to make sure the seller’s insurance will cover incidents that occur during the trial period. If the seller’s insurance will not cover the trial period, good equine insurance agents can often sell the prospective buyer a short-term insurance “binder” that will cover incidents that occur during the trial period. These short-term "binders" may be extended by a formal policy if the prospective purchaser decides to keep the horse. If the prospective buyer purchases an insurance “binder”, the seller should be named as additional insured.

3) Written Purchase & Sale Agreement. All terms of a purchase agreement “on trial” should be reduced to writing. Among other things, the specific term of the trial period should be set out, as well as who will bear the risk if the horse is injured or dies during the trial period. A “security deposit” can also be provided for in the agreement, along with specifics on when the seller can keep the deposit and in which instances the deposit will be refunded to the prospective buyer. The bill of sale (which transfers title to the horse) and the registration papers should not be signed over until after the trial period has expired.

4) Liability Release. The seller should consider having the prospective buyer sign a release of liability should the prospective buyer or its property be damaged during the trial period. This will not cover injury to third parties in most instances. A seller can procure a liability insurance policy to cover accidents involving the horse and third parties.

5) Location of Horse During Trial Period. A seller should have a prospective buyer agree in writing as to a single location where the horse will be kept during the trial period. The seller can deliver the horse to said location or make other arrangements to either approve or disapprove the living conditions of the horse before the horse is released to the prospective buyer. If the prospective buyer intends to board the horse with a third-party, it is wise for sellers to make sure that the prospective buyer pre-pays board for the trial period in advance. This is to guard against stableman’s or agister’s liens being placed on the horse if the prospective buyer does not pay board during the trial period.

Due to all of these concerns (and others), I do not typically recommend that prospective buyers or sellers enter into "trial period" sale agreements. In the best case scenario, a seller would allow a prospective buyer to inspect the horse as much as needed prior to the sale, either 1) on the seller's premises; or 2) at some other venue to which the seller would transport the horse for purposes of inspection.

This post was in response to a special request I received from a reader for a blog post on horse sales with trial periods. I’m kind of like one of those music groups that takes requests as long as the song is in their repertoire, and I don’t even ask for tips in return! So please contact me if you have any special requests for a blog topic. I’m always looking for good content that will be helpful to my readers.

Oktoberfest came to an end in Germany this Monday, October 3. But in Texas, you can still find some places to celebrate Oktoberfest this weekend and later this fall! To kick off your celebration, here is an overview of the current state of German law as it relates to horse sales by German lawyer Nikolaus Fackler. In the spirit of Oktoberfest, this post is even being provided to you in both English and German, for your reading pleasure. Prost!

Photo: Flag of Lower Saxony, Germany [Niedersachsen]

“Before January 1, 2002, dieGewährsmängel (the “minimum warranties”) applied to the purchase and sale of livestock under German law. Pursuant to dieGewährsmängel, a buyer could rescind a sale if a buyer discovered the following vices or diseases in a horse within a certain time frame:

Dummkoller (spinal ataxia)

Periodische Augenentzündung (moon blindness)

Rotz (glanders)

Kehlkopfpfeifen (roaring / laryngeal hemiplegia)

Koppen (cribbing)

Dämpfigkeit (heaves / COPD)

The statute containing the Gewährsmängel was found in Sections 481-492 of the old version of the German Civil Code (Bürgerliches Gesetzbuch or “BGB”) and the “Imperial Ordinance Concerning the Main Defects and Warranty Periods in the Sale of Livestock” (27 March 1899).

DieGewährsmängel were abolished on January 1, 2002, when the German “law of obligation” changed as part of the required harmonization of German law with European Union legislation.

As of January 1, 2002, German law relating to the sale of livestock is the same law that applies to the sale of goods, in general. The following rules now apply in Germany to the sale of all goods, including horses:

A good is free from warranty defects if it possesses the represented qualities.

If no qualities were represented, a good is free from warranty defects if it is acceptable for general use.

These current rules are found in Section 434 of the BGB (i.e. Sachmangel), which can be downloaded here.

If a horse, for example, is sold as a show horse, it must be suitable for use as a show horse. If no qualities are represented, however, a horse must only be acceptable for general use.

This change in the law doesn’t mean we should completely forget about the old Gewährsmängel, though. Most regional superior courts in Germany would still likely find that cribbing, for example, is an abnormal behavior and an expression of a mental defect. Therefore, most German courts would find that a cribber is not acceptable for general use. This uncertainty under current German law illustrates the point that it is more important than ever to get all horse sales contracts in writing and to set forth all applicable warranties [or lack thereof] in said contract."

About Nikolaus Fackler: Nikolaus “Nick” Fackler is an attorney in Augsburg, Germany with over 30 years’ experience. His areas of expertise include equine law, criminal law, and commercial law. For more information, see Nick’s full biography.

"Pursuant to European legislation, a horse that is delivered to a buyer in a horse sale transaction needs to meet up to the purchase and sale terms agreed upon between seller and buyer. For example, if the parties agreed upon specific qualities of the horse, the horse needs to have these specific qualities at the time of sale. If a buyer can prove after the sale that the horse did not have these specific qualities at the time of sale, the seller can be held liable for this shortcoming. In cases where no specific qualities are agreed upon, and/or it is not discussed that the horse needs to meet specific criteria, the horse still needs to be suitable for so-called 'normal use'."

"What constitutes 'normal use' depends upon what the buyer may expect under the circumstances of each particular sale. Another factor used in Europe to determine whether a horse is suitable for 'normal use' is the amount of the agreed purchase price. In cases where, for instance, the horse is found to have been permanently lame at the time of sale, most courts in Europe will find that the horse was not suitable for 'normal use'."

"In cases where the seller has guaranteed or expressly warranted specific characteristics or qualities, the horse needs to meet up with the features that were guaranteed or expressly warranted by the seller. In cases where the horse is found to have not possessed these guaranteed characteristics or qualities at the time of sale, the seller can be held liable. When the seller makes a guarantee or express warranty about a horse, the buyer does not have to investigate whether the horse indeed has these qualities and the buyer may rely upon the seller’s representations. In other words, in cases of express warranties, courts in Europe will not hold it against the buyer that he did not investigate the seller’s representations about the guaranteed or warranted qualities."

When does EU law apply to a horse sale?

"EU countries are required to revise their national statutes / codes, if necessary, so that they are compliant with EU legislation. In other words: EU member countries have to implement the EU legislation into their own statutes / codes. Therefore, because national statutes must comply with EU legislation, this EU law may apply to every horse sale where EU law or the law of an EU member country governs a sale. Note: the implementation of EU law is a minimum requirement for EU countries. EU countries can make their national statutes more specific. If parties explicitly agree that Dutch law, for example, will apply to a horse sale, then Dutch law will indeed apply. But indirectly, EU law will apply as well because Dutch law is based upon on EU legislation."

About the Author

Mr. Luc Schelstraete is the founder of European Equine Lawyers and Equestes. Both entities are based in Holland. Luc and his staff (6 attorneys and 5 office staff) specialize in international equine law. They assist clients in purchase and sale documentation and litigation involving horses purchased in Europe.

Today's post is a reprint of a "blurb" I did for a colleague's newsletter this week. My colleague, Luc Schelstraete, is a top-notch equine attorney practicing in the Netherlands and his firm is called European Equine Lawyers. Luc and I are pictured below at the "Poco Bueno" brand clothing booth at the Americana 2011 trade show in Augsburg, Germany.

There is no federal law in the United States that uniformly governs documentation and disclosure requirements for horse sales. Only three U.S. states have enacted statutes specific to horse sale documentation and disclosure requirements (California, Florida, and Kentucky).

In general, the horse sale statutes in California, Florida, and Kentucky [click hyperlinks to view statute / rules] all require the following for most private treaty horse sales:

1) A written bill of sale that is a) signed by both parties, and b) sets forth the purchase price for the horse;

2) Written disclosure to both purchaser and seller of sales commissions in an amount or value of $500 or more; and

3) Written consent by both purchaser and seller if someone is acting as a dual agent (i.e. a sales agent for both the buyer and the seller of the horse).

The penalties for failure to comply with these statutes can be harsh (i.e. “treble damages”). Determining which state’s law might apply to an international horse sale involving a buyer or seller in the United States might be tricky for a party based in Europe.

Due to these concerns, parties to all international horse sales involving a party in the United States would be well advised to at least comply with points 1-3 above and further stipulate in writing which state or country’s law will apply in the event of a dispute arising from the horse sale.

Parties are further advised to review Florida’s rules carefully if they might apply to a sale. Florida’s rules contain more extensive requirements for horse sale documentation and disclosures than those found in Kentucky and California’s statutes."

As a P.S., don't forget that tomorrow (September 9) is the deadline to nominate blogs for the "ABA Best 100 Law Blogs" and I'd appreciate your vote. See my bleg from August 11 for more info!

As you are reading this post, I'm probably at DFW airport getting ready to board a 10 hour Lufthansa flight bound for Deutschland.

That means that--Lord willing and the creek don't rise--the Equine Law Blog will be broadcasting live from Germany during the weeks of August 22 and August 29!

While in Germany, I plan on spending some time at the Luhmühlen Horse Trials (i.e. HSBC European Eventing Championships) as well as the Americana Horse Show in Augsburg.

If any of you dear readers of the Equine Law Blog will be in the Hannover or Augsburg area in the next two weeks, give me a heads up because I would love to get together!

While we're on the topic of international horse events, this page from Nedpoint Quarter Horses in Pauls Valley, Oklahoma has some great info on the import/export of horses between Europe and this area of the world.

Have a great Thursday, a great weekend, and I'll look forward to updating you on interesting equine law topics from the temperate climes [read highs in the mid 70's] of beautiful Germany.

In addition to the terms usually included in a contract to buy a horse, a Purchase and Sale Agreement involving the shipment of a horse to another country should include the following terms:

1)Applicable Law: Will your country’s law, or the law of the other party’s country apply to the contract? This is important, considering that certain German-speaking countries have “minimum warranty” statutes applicable to horse sales (die Gewährsmängel). These minimum warranty statutes may make it virtually impossible for a buyer to resell a horse if it has any of the problems (such as cribbing) that do not meet the “minimum warranties” in those countries.

2)Terms for Delivery of Horse & Money: Your agreement should set for a specific protocol for when and where the horse, the bill of sale, registration papers and health certificates, and sales proceeds should be delivered.

3)Commissions: Your should specify which parties are receiving a commission (buyer’s agent, seller’s agent, or both?), the amount of the commission, and the protocol for the delivery of the commissions.

4)Disputes. How will disputes, if any, be decided? Having to bring suit in another country in the case of a horse sale gone bad is time-consuming, expensive, and may be impossible. I recommend including a provision for alternative dispute resolution in international horse sales contracts, naming a reputable mediation or arbitration forum such as Equestes to settle or decide disputes.

Before you buy a horse from someone in another country or sell a horse internationally, you must have the following four items in place to help avoid disputes and headaches:

1) Written Purchase and Sale Agreement. An international sale is typically not one where a buyer can show up with a trailer, hand the seller a check, and load up the horse. In addition to the usual points typically covered in ordinary sales contracts (description of horse, price, warranties or lack thereof, pre-purchase exam conditions, et cetera), your international sales contract needs to address the logistics of how and when the horse, its papers, and the money will be delivered. Stay tuned, as I will do a post next week on the items your international sales contract should include.

2) Escrow Service. The use of an escrow service to hold sales proceeds and commissions until certain terms of your Purchase and Sale Agreement have been carried out is a huge help in avoiding disputes and confusion.

3) Written Bill of Sale. Your bill of sale, and not the registration papers or health certificate, is the instrument that transfers title to the horse. Your Purchase and Sale Agreement should make clear when the bill of sale should be delivered to the buyer (usually, it is delivered with the horse together with registration papers and health certificates after the escrow account is funded).

If you have exported a horse internationally, you probably already know about the international demand for nice American Quarter Horses bred in the US. If you have not yet sold a horse to an international buyer, you might start looking to the international market for sales possibilities. The AQHA’s international department reported to me today that the total dollar amount in bloodstock exported internationally has increased over the past few years, even in this depressed horse market. The AQHA is also looking to position someone in Chinato manage AQHA’s affairs in that country.

NRHA Reiner Online announced today that a “big money” reining event, the NRHA European Affiliate Championships is happening next week in Switzerland. The venue for the show is the CS Ranch in Givrins, Switzerland. If you don’t believe the Europeans are “getting Western”, check out the CS Ranch’s show and training facility in Switzerland. Looks like they’re open for serious business.

In other international news, the Americana, billed as “Europe’s #1 Western Horse Show” will take place in Augsburg, Germany beginning on August 31. I will be attending the Americana, so contact me if you’re going and I’ll meet you there! The Americana will feature the European Championships for cutting and working cow horse. These international markets are moving into disciplines that involve working cattle in addition to reining and Western pleasure-type events.

Stay tuned for a discussion of legal issues arising in international horse sales.